CASE SUMMARY
On March 30, 2010, Judge William Alsup granted plaintiff's motion for summary judgment finding that the failure to hold a shareholder vote to
change the limit on the percent of assets that the Fund could hold in private-label mortgage-backed securities violated the Investment Company Act.
Prior to September 1, 2006, the Fund applied a 25% limit on these assets. Plaintiff alleges that defendants increased this limit in September 2006
without holding a required shareholder vote on the change and that the excess investments in private-label mortgage-backed securities caused a
substantial portion of the Fund's losses.
The Court ordered the parties to address two possible measures of restitution, which is the only remedy available. First, the Court asked what the performance of
the Fund would be if the investments in mortgage-backed securities over the 25% limit had been invested in cash ("Cash Option"). Second, the Court asked how the
Fund would have performed if the amount over 25% had been reallocated to other assets in the Fund ("Reallocation Option"). Plaintiff's experts calculated the
value of restitution to the Class under the Cash Option to be $52,203,379 and $33,014,433 under the Reallocation Option. The average of these two options, $42,608,906,
represents an 82.1 percent recovery. Defendants' experts calculated values at $12 million and $5 million, respectively, under these options. It is difficult to predict
how this battle of experts would have been resolved by the Court. If the Court chose to accept defendants' methodology, the settlement far exceeds the recovery under
such a scenario. Settlement avoids the uncertainty of a bench trial, the costs and risks associated with continued litigation, including the danger of no recovery
or a protracted delay on appeal, and provides a substantial benefit to the Class now.
Commencing on June 25, 2010, the Settlement Administrator mailed
Notice Packets with attached Record of Fund Transactions and Transaction Dispute forms to
Class Members. You do not need to submit a claim or a request for payment. Your holdings and transactions that qualify for a share of the settlement have been
obtained from Schwab's transaction records. Your estimated recovery is attached. If you do not agree with the Record of Transactions and you wish to submit a
Transaction Dispute form, your dispute must be postmarked on or before August 9, 2010.
With some exceptions that are explained in the detailed Notice about this case, the settlement, if approved by the Court, will provide for payments to:
All Persons who were a California Resident and held shares of the Schwab YieldPlus Fund on September 1, 2006.
Defendants have agreed to pay $35 million in cash. The balance of this fund after payment of Court-approved attorneys' fees and expenses and the costs of settlement
administration, including the costs of printing and mailing this Notice (the "Net Settlement Fund"), will be divided among all eligible Class Members.
Further information is available from the
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